FTSE 100 falls slightly but investors remain upbeat on vaccines and hopes for US stimulus deal

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he FTSE 100 was expected to make a flat start to the week after the previous five days were marked by a rapid chase towards 7000.

Spread betting markets were predicting modest falls in early trading of around 12 points to 6852.1 as the week got off to a quiet start in terms of dramatically different events on the world stage.

Democrat efforts to impeach Donald Trump were seen bearing little import for markets which continue to look beyond the current soul-searching in the US over the mob storming of the Capitol.

Instead, markets continue to focus on Joe Biden’s likely boost to the Covid-19 stimulus package, vaccines and the fact that Britain and the EU managed to pull off their trade deal.

The intricacies of that deal are beginning to be felt, however, with growing concerns about tariffs that had been unexpected by businesses on both sides of the Channel.

Paperwork has increased hugely on companies, like Marks & Spencer, which import ingredients before turning them into meals which it then exports to the continent. Some are being hit by import tariffs, some aren’t, depending on how much processing is done to the ingredient in the UK.

Others have been caught out by the same headache when moving goods to Northern Ireland, which is now being treated as an EU country in that regard, leaving firms like TK Maxx and John Lewis pausing exports there.

The coming couple of weeks is likely to see hold-ups at ports as volumes of goods begins to increase. 

On the vaccines front, last week’s optimism after the UK and EU approved Moderna’s drug boosted sentiment, while reports that AstraZeneca’s Oxford University team would seek approval in the EU this week should also improve matters.

However, there were some wobbles in sentiment this morning after Friday’s US employment data came out weaker than some had expected.

China’s inflation levels today came out at 0.2% – slightly higher than the 0.1% expected by economists and far stronger than November’s deflationary minus 0.5%. Factory gate prices narrowed their previous fall but were still not in positive territory.

All eyes will again be on the oil price after last week’s stellar gains prompted by Saudi Arabia’s promise to cut output. BP and Shell have both had strong runs, which boosted the FTSE 100 to outperform many markets.

Christine Lagarde, ECB head, will be talking climate change at a panel meeting this afternoon but other than that the economic news agenda is quiet for the day.

Shares in Entain, the owner of Ladbrokes, could slip back after Barry Diller, the billionaire chairman of MGM Resorts’ largest shareholder, said the casino group’s bid for the UK group may well fail. Entain has rejected the offer, which is all in shares and values the company at £8 billion.

Banks could have a stronger session after weekend press speculation repeated the idea that the sector could be in for a good 2021 with inflation potentially re-emerging.

M&G shares could come under pressure after it admitted investors in its gated property fund suffered negative returns of 11%. Investors have also paid fees £12-£14 million while being unable to withdraw their funds.

Boohoo, the online fashion giant, received more brickbats today as it emerged that the founder’s son, Umar Kamani, received a £3.4 million dividend from his Pretty Little Thing brand three months before selling it to Boohoo.

Umar already raised investors eyebrows after selling his 34% stake in the firm last May to Boohoo for £330 million, triggering questions about the running of the family-dominated firm, which was subsequently attacked for poor working conditions at its Leicester supply chain.

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